SECOND HOMES
With the glorious British summer in full swing, the thought of buying a second home in one of the stunning coastal resorts of the UK has been playing on the minds of many people. This factor, together with low mortgage rates and increasing property values, has prompted some people to release equity from their main residence in order to buy another.
For the majority of people, the easiest way to purchase a second home is by releasing equity from their main residence in order to fund the deposit for the new property. This equity can be released by either raising additional funds with their existing Lender, or remortgaging to a new Lender, taking advantage of one of the fantastic deals currently available. Remortgaging releases the deposit and also ensures that any existing borrowing is at a competitive interest rate. Those with significant levels of equity may even be able to release sufficient funds to acquire a second home outright.
Once the deposit has been sourced the mortgage can be obtained. Increased competition has driven down costs and many lenders are now prepared to grant mortgages for second homes on the same terms as those available for main residences. Unlike buy-to-let mortgages which rely on rental income to service the debt, the borrowers personal income is relevant and will need to be evidenced.
Whilst it may be your initial intention to use the second home for personal use only, in time you may decide to let the property on a short-term basis to generate rental income. If you do decide to take this approach you should seek permission from your Lender first.
Those worried that the UK housing market is overheated may be inclined to look overseas. France, Italy, Portugal and Spain are all popular areas for property investment. Lower property values and the increased availability of budget flights add to the attraction. We have recently established an overseas mortgage division in order to handle the growing number of enquiries in this field. It must be noted however that although the UK housing market is very sophisticated, financing an overseas property can be rather complex. Careful consideration needs to be given to the interest rate and the currency risk. As ever, the need for advice from a qualified IFA is vital.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
THE STERLING EQUIVALENT OF YOUR LIABILITY UNDER A FOREIGN CURRENCY MORTGAGE MAY BE INCREASED BY EXCHANGE RATE MOVEMENTS.
(22 August 2003)
